29
information technology sector may indicate higher technological level. It is, however, not
clear yet why firms in Shanghai are less profitable than those in other cities in 2000. It is
notable that the average percentage of R&D expenditures in 1998, 1999 and 2000 is not
significantly positively associated with ROA in 2000. This might suggest that the effect
of R&D expenditures on ROA lag behind the effect of R&D collaboration. Thus, R&D
collaboration in China might be more profitable in the short run than in-house R&D
expenditures.
Model 2 in table 3 regresses the average sales growth rate during 1997-2001 on
whether a firm had R&D collaborations in either of the three years, controlling for log
(sales income in 1997), average R&D expenditures in the three years, firm age, industrial
sectors, geographic locations, and shares of government and foreign ownership.
13
In
keeping with hypothesis 6, it is shown that the sales growth rate of the firms having R&D
collaborations in either of the three years is significantly greater than the sales growth
rate of the firms having no R&D collaborations. For other variables, R&D expenditures
contribute to sales growth rate very substantially; the effect of initial sales income in
1997 is negative; foreign owned firms grow much faster in sales income; firms in
Shanghai grow much faster than those in other cities; firms in Tianjin grow much slower
than those in other cities; and firms in information technology sector grow much more
rapidly than firms in other sectors. These results are consistent with Hallward-Driemeier
et al (2002).
13
Log (firm scope) and import share are not controlled in models 2 and 3 of table 3 because these variables
are for 2000 only in the data. The ownership structure is also for 2000 only. I include the ownership
structure in models 2 and 3 but not firm scope and import share because the former is much more stable
than the latter. In fact, the results for model 2 and 3 do not change if I add firm scope and import share into
or drop the ownership structure from these two models.
Convention